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Employees that makes an annual salary of over $100,000 in 2019 are removed from the loan forgiveness calculation. Total results for all employees that have salary or hourly wages decreased by greater than 25%, You made a written offer to rehire such employee during the covered period, The offer was for the same salary or wages and same number of hours earned by employee in the last pay period, You maintain records documenting offer and rejection, Inform the state unemployment insurance office of employee’s rejected offer. The covered period begins on the date you receive your loan and ends 24 weeks (168 days) later, or Dec. 31, 2020, whichever is earlier. For more information, check out our FAQs below! If an employee declines your offer, you will be eligible for an FTE Reduction Exception and your forgiveness amount will not be reduced. What if an employee refuses to come back to work? Please keep in mind this information is changing rapidly and is based on our current understanding of the This is known as SBA Form 3508: Paycheck Protection Program Loan Forgiveness Application. We will do our very best to keep the information up to date but please remember that instructions are being clarified and refined on a daily basis. Rent – as long as the mortgage was signed before February 15, 2020. Yes. It can and likely will change. Borrowers now have 24 weeks to spend PPP loan proceeds, up from 8 weeks. However, borrowers whose loans were made before June 5 have the option of using a covered period of either 8 weeks or 24 weeks. Thank you for visiting our PPP Loan Forgiveness Calculator! If you received your funds on or after June 5, 2020, you must use the 24-week … Extending the time a borrower can qualify for the FTE and Salary Wage reduction safe harbors. How do I get the number for rent, utilities, and mortgage interest for the covered period? We’re an online bookkeeping service powered by real humans. PPP App Main PPP Forgiveness Calculator DISCLAIMER: This Calculator is intended for general education and/or information purposes only and does not replace specific, independent professional advice. No pressure, no credit card required. Some small business owners may find it easier to maintain staffing levels for eight weeks than 24 weeks. Download the PPP Loan Forgiveness Calculator. If you qualify for full forgiveness after eight weeks, you may be better off applying then. When it comes to PPP forgiveness calculation, you need the PPP Schedule A Worksheet, PPP Schedule A, and PPP Loan Forgiveness Calculation Form (in that order). Forgiveness is equal to the sum of the following costs incurred and payments made during the 24-week period beginning on the date the loan is disbursed by the lender to the merchant. Borrowers who received their PPP loan after June 5th will automatically have to calculate their expenses for the 24 weeks period which ends on December 31, 2020. All of our services are eligible expenses for PPP forgiveness, and we’ll even provide support in applying for the PPP (or getting that loan forgiven). The amount of the loan that may be forgiven could be reduced proportionally should employees or wages be … Submit the PPP loan forgiveness form to your lender. We’ll do one month of your bookkeeping and prepare a set of financial statements for you to keep. You can use up to 40% of the PPP loan to pay these costs during the covered period. This Calculator is based on the current version of SBA Form 3508 PPP Loan Forgiveness Application (05-15-20). Now, many businesses will be able to achieve full forgiveness just using payroll costs alone. So, please consult with the legal and financial professionals that you work with to understand how this may be beneficial for your business. You may file your forgiveness application before the end of your Loan Forgiveness Covered Period (whether 24 or 8 weeks). This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. PPP Forgiveness Calculator. becomes available, please do not rely solely on this for your financial decisions. Note: The Paycheck Protection Program Flexibility Act of 2020 changed the covered period from 8 weeks to 24 weeks. The main draw of the SBA’s Paycheck Protection Program (PPP) is that you can get up to 100% of the loan forgiven. When do you start to apply the 24 week period (covered period) for using your loan? Some businesses have a heightened sense of urgency to apply for forgiveness, but want to be prudent in ensuring that the maximum amount qualifies for forgiveness. For those businesses that receive a loan after June 5, 2020, the OCR for the 24-week covered period is capped at 2.5 months’ worth of 2019 net profit, up to a maximum of $20,833. This is the total amount of your PPP loan that will be forgiven. By taking advantage of the extended forgiveness period, business owners have more time to talk to their advisors and strategize ways to achieve maximum loan forgiveness. Reductions in employment or salary that occur between Feb 15, 2020 and April 26,2020 will not reduce the amount of loan forgiveness if you eliminate the reduction in employees or the reduction in wages by June 30, 2020. Basic rules for PPP loan forgiveness as of 2021: In case you need the basics for PPP loan forgiveness: First Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement: … Paycheck Protection Program Flexibility Act, Paycheck Protection Program (PPP) Loans Resource Hub for Small Business, 2020 Taxes: How the PPP, EIDL, and PUA Will Affect Your Taxes, The Top (Lesser Known) COVID-19 Relief Resources, PPP vs Unemployment Benefits: How to Choose, PPP Forgiveness for Independent Contractors and Sole Props, After the PPP: Your Next Steps After Getting Approved, PPP Lenders: Where to Get a Paycheck Protection Loan, Required Documents for Your PPP Application. First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement: Employee and compensation levels are maintained The loan proceeds are spent on payroll costs and other eligible expenses; and At least 60% of the proceeds are spent on payroll costs Under the old rules, you had to spend 75% of the loan on payroll costs. You use at least 60% of the loan on eligible payroll costs. However, there is an exception for rehires. Add up all the numbers for all your employees and this will get you the average FTEs during the covered period. Divide the covered period by the lookback period. If the result is less than 0.75, multiply the lookback period value by 0.75 and subtract the covered period value. The Paycheck Protection Program Flexibility Act made some significant changes to PPP loans. Take advantage of current rules and interpretations. However, if you haven’t applied for forgiveness within 10 months of the end of your covered period, you’ll have to start making payments. Based on the new forgiveness application form 3508EZ if you received your PPP loan on or before June 5, 2020, you may choose an 8-week Covered Period or a 24-week Covered Period. Portion of forgiveness associated with payroll lowered to 60% from 75%. Reduces mandatory payroll spending from 75% to 60%. PPP Loan Forgiveness: The 24-week extension of the PPP Loan forgiveness period has also increased the maximum forgiveness cap for payroll costs per individual for eligible businesses with employees. How do I determine if there's a decrease in wages greater than 25%? You can find more details in submitting the the PPP loan forgiveness application in this article: Paycheck Protection Program loan forgiveness. If you’re able to qualify for full loan forgiveness after eight weeks, you can have the forgiveness process wrapped up within the current calendar year. Do I choose 8 weeks or 24 weeks? However, there are a few advantages and disadvantages of each. These stipulations were created to incentivize people that receive the loan to retain employees and their wages. Borrowers who received loans prior to June 5 have the option of an 8-week or 24-week covered period while all borrowers from June 5 on have a 24-week covered period. If the result is 0.75 or greater, then the employee will not affect your forgiveness amount. Note: The Paycheck Protection Program Flexibility Act of 2020 changed the amount you can use on non-payroll costs from 25% to 40%. How do I get my total payroll costs for the covered period? More of the loan can be spent on payroll costs. If you can’t maintain the number of Full Time Equivalents (FTE) employees, then you’ll see a decrease in the amount of loan forgiveness you will be eligible for. How do I apply for PPP Loan forgiveness? Borrowers who received a PPP loan before June 5, 2020 (the effective date of the PPP Flexibility Act) may elect to use their original covered period (eight weeks after their loan was received). So if eight weeks just won’t work for you, the Flexibility Act now allows some flexibility for achieving 100% forgiveness. The new guidance states if you apply for forgiveness before the covered period is over, and you’ve reduced any employee’s salary or wages by more than 25%, you must still account for the excess salary reduction for the full 24 weeks. No, payroll costs must be paid during the covered period. That essentially gives you a 10-month deadline to apply for forgiveness. We will continue to update our calculator and FAQs on this page as additional guidance is released. But how much you actually qualify for depends on what you spend the money on during those first 24 weeks after your loan is disbursed. Lender must make decision on forgiveness within 60 days. The good news is, you don’t have to decide immediately whether to take eight or 24 weeks to spend the funds and calculate loan forgiveness. If you were assigned a PPP loan number on or before June 5, 2020, you now have the option of taking 24 weeks to spend the funds instead of eight weeks. One of the conditions for forgiveness is maintaining the number of employees on your payroll. Where can I get the PPP forgiveness application form? Although we will be monitoring and updating this as new information Weekly or Bi-weekly Payroll Cycle: Choose the first day of your first payroll cycle after your PPP loan was received as the start date for the 8 weeks or 24 weeks period. How do I get the number for average FTEs (Full-Time Equivalents) during the covered period? For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the Covered Period. Please note that this blog and the 24-week PPP loan forgiveness templates are based on laws effective in August 2020 and may not contain later amendments. The SBA’s PPP website has additional PPP loan forgiveness information. To determine if wages has decreased by more than 25%: Enter zero if there were no reductions in excess of 25%. Not more than 40% of … More time to plan. For self-employed individuals without additional employees on payroll, the OCR of 2.5 months’ worth of 2019 net profit will equal the loan amount, which means the loan can be fully forgiven through OCR alone. For example, a 20% drop in FTEs results in a 20% decrease in the amount of the loan forgiveness. Loans disbursed on or after June 5, 2020 automatically have 24 weeks. However, if you can qualify for forgiveness within eight weeks, you might be better off submitting your forgiveness application right away. We want to share what we have learned to help you understand what funds may be available for you, how to apply for those funds, what documents you will need, and hopefully help you avoid pitfalls along the way. Updated 6/25/2020. Compensation earnings are capped at $100,000 yearly per employee. How sole proprietor PPP loans are calculated. Add up all the numbers for all your employees and this will get you the average FTEs during the comparison period. 7 We dug through two main sources to get you the answers – the Cares Act and the SBA’s Interim Final Rule. Sign up for a trial of Bench. We’ve made Coast free for teams to use during this time. At first, having more time to spend your loan proceeds seems to make more sense. Download the 8-Week Full Time Equivalent (FTE) Calculator. The maximum for each employee is 1.0. In other words, the forgiveness amount will be reduced as if the salary reduction were in effect for the remainder of the covered period. Forgiveness for owners (including S or C Corporation shareholders) will be limited to 15.385% for the 8-week period or 20.833% for the 24-week period of their 2019 compensation with other limitations. You will also need to provide documentation for your payroll and non-payroll costs and FTE employee counts. Now to calculate these amounts, consider reading the Table 2 section in this article: Understanding your Cash compensation report for PPP Loan Forgiveness. How do I get the number for average FTEs (Full-Time Equivalents) during the comparison period? To avoid payments on the principle of the loan amount, you should apply for loan forgiveness within 6 months. In order to apply for loan forgiveness for the PPP program, you are required to complete the U.S. Small Business Administration Form 3508. 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